Italy's Padoan says left-right coalition possible: paper

MILAN (Reuters) - A coalition between Italy’s main left- and right-wing parties cannot be ruled out if no clear winner emerges from the upcoming general election, the country’s economy minister was quoted on Sunday as saying.

Italy will vote on March 4 in an election expected to produce a hung parliament, feeding instability in a country made vulnerable by the world’s third-largest public debt and weak growth potential.

In an interview with Sunday’s Corriere della Sera, Pier Carlo Padoan said he expected that none of the three main groups or blocs - the anti-establishment 5-Star Movement, the left-wing Democratic Party (PD) and an alliance of conservative parties - would be able to govern alone.

Latest polls suggest the rightist bloc that includes former prime minister Silvio Berlusconi’s Forza Italia (Go Italy!) will win most seats in March but will not gain an absolute majority.

Asked if the PD and Forza Italy could form a government, Padoan said: “In a context of high uncertainty nothing can be ruled out. Such uncertainty is already being perceived. Financial markets are rather nervous it seems to me.”

Left and right parties in Italy have supported each other in power previously, but both have ruled out publicly any grand coalition in March if no clear winner emerges.

Berlusconi met the leaders of his rightist allies the Northern League and Brothers of Italy on Sunday at which they agreed the broad outlines of a joint program.

This included a pledge to double minimum pensions to 1,000 euros ($1,200) per month, cut taxes, increase controls on immigration, seek fewer constraints from the European Union and revise a recent pension reform that hiked retirement ages.

Parties across the spectrum are pledging to change or abolish European Union budget rules, slash taxes and spend more to boost the economy which is slowly recovering from recession.

Forza Italia promotes itself as the most moderate force on the right, while the PD, led by former prime minister Matteo Renzi, presents itself as more responsible than its rivals.

Asked about proposals to introduce a flat tax rate, Padoan said the 15-percent rate suggested by the far-right Northern League was not sustainable, while Berlusconi’s suggestion of a figure around 20 percent was “less unsustainable.”

“I would explore a tax reform that would simplify the tax rates reducing them to one or, better, two. But we should avoid benefiting disproportionately higher income earners.”

Padoan is a former economist from the Organization for Economic Co-operation and Development who joined Renzi’s government in 2014 and belongs to no party. He said he would consider running for parliament if asked to do so.